In one of those surprise/not-surprising announcements yesterday afternoon, Jim Flaherty resigned as the federal finance minister. Citing ongoing health issues, and a desire to make bigger bank in the private sector, Flaherty will stand as MP for Whitby-Oshawa until the 2015 election. Natural Resources Minister Joe Oliver is expected to segue into the finance portfolio in an announcement later today, but Flaherty will cast a long shadow as the government looks to enter a black phase in the budget and re-election mode next year.
Not to throw cold water on some of the overly florid career appraisals of Flaherty, especially Robert Fife's on yesterday's CTV News, but all the praise about the now former finance minister's steadfast leadership through tough economic times should be tempered by the realities of how that reputation evolved.
For instance, Flaherty's previous tenure as finance minister in the government of the province of Ontario ended with him leaving office with a $5.6 billion deficit behind him. That's about half of the current Ontario deficit, but Flaherty's PC government was in power from 1995 to 2003 enjoying, for the most part, a boom economy. The fact of the surprisingly large deficit was compounded by no one outside the PC government knowing about it until an auditor's-general report revealed it, suggesting that the PCs were prepared to hide it till after re-election, or were willing to stick the next guy with the cheque.
The fact of a budgetary deficit in Ontario post-Mike Harris/Ernie Eves was all the more surprising because thier's was the government of the "Common Sense Revolution," a plan to cut taxes while slashing government spending. Those most affected were welfare recipients, schools, hospitals and public sector workers, leading to wide-spread labour disruption and, in some extreme cases, death. Exaggeration? Think Walkerton, or the SARS crisis which threatened to overwhelm the Toronto hospital system.
But short-sightedness has always been a Flaherty trait. In the spring of 2008, he continued to forecast large surpluses even with the Great Recession looming on the horizon. Of course, the full extent of that crisis was hard for anyone to foresee, but the aftermath required immediate action in form of stimulus, and Flaherty was less than convinced that such measures were necessary. An economic update in the fall of 2008, and the lack of any surplus spending announcement, lathered up the opposition to start talking about non-confidence motion, which then prompted Stephen Harper's first great proroguing of Parliament. When Parliament came back, Flaherty announced the first round of stimulus, a move that he's now receiving praise for in the post-game.
But so long as we're trying to stop the re-writing of history to cast Flaherty in a light of fiscal prudence, let's not forget that one of his first acts as finance minister in 2006 was to throw the doors open to American insurers, like AIG, to supply the same kind of heinous subprime mortgages that would tank the world economy just two years later. At the same time, he doubled the government guarantee of those mortgages, reducing the risk to AIG and others to zero while leaving the Canadian taxpayer on the hook in case those mortgages went belly up, just like what happened in the U.S. in the fall of 2008.
If Flaherty's been able to steer the ship well though some very choppy waters, it's because of the fine navigational ground work laid by his predecessor, the previous long-time financial minister and former Prime Minister Paul Martin. Martin knew that the banks were big enough, he knew the dangers of a deregulated housing market, and he knew the benefits of paying down the deficit and the debt, which created the tremendous surpluses that the Conservatives enjoyed (and pressumed to continue) and ultimately provided a cushion as the economy forced Flaherty into a position of deficit spending.
Of course, none of that is to say that we shouldn't thank Flaherty for his service, or ignore the fact that he handled a tough job in very tough times with aplomb. But while I know you're not supposed to speak ill of the dead, let's not paint Flaherty too saintly. In Fife's report he credited Flaherty for having a "big heart" for being a parent of children with disabilities, one of the reasons he initiated the Registered Disability Savings Plan (RDSP). That's nice, I thought, but as is typical nowindays, it seems that some people can only be generous when they have a personal stake in a cause. It's just too bad that the poor, the sick, the uneducated, and the environment didn't have a relative in Flaherty's family to represent them.